GSK tops City target with £1.6bn

Tuesday 23 April 2002 23:00 BST

DRUGS giant GlaxoSmithKline has topped City forecasts for its first-quarter profits, helped by strong sales of Advair and other asthma drugs. The results suggest the group will ride out tough times this year, although doubts remain about its long-term prospects given patent threats and a lack of promising new drugs.

Chief executive Jean-Pierre Garnier reiterated his prediction of 'mid-teens' earnings growth for the full year and 'low-teens or better' in 2003.

Earnings per share came in at 19.0p, up 18% in constant currencies, against the consensus analyst forecast of 18.8p. Pre-tax profits were £1.59bn, against £1.39bn a year ago on sales 11% higher at £5.11bn.

Advair, also sold as Seretide, sold £699m worldwide in the first quarter, lifting total asthma drug sales to £967m. Advair is now GSK's third-largest product after less than a year on the US market.

GSK shares were 2.5% higher at 1679p by midday. 'We think the Glaxo figures were not a bad set of numbers, very solid indeed,' said one dealer.

The stock has underperformed the European sector this year, dragged down by growing worries about the strength of patents on antibiotic Augmentin and antidepressant Paxil.

GSK faces complex legal challenges to its market exclusivity on both products, which are unlikely to be resolved until 2003 or 2004. Loss of patent protection and cut-price competition from generic medicines are mounting problems for global drugmakers, triggering a spate of profit warnings from mainly US manufacturers.

GSK insists it can fight off the threats to its patents while refilling its drug development pipeline by in-licensing promising products from other companies. But speculation has increased recently that the group might consider another strategic acquisition to kick-start earnings and avoid a slowdown in growth after 2003, with embattled US group Bristol-Myers Squibb one potential target.

Garnier declined to comment on the US group, saying his first priority was developing in-house products.

'We are looking at the best early-stage clinical pipeline in the industry at this point,' he said. 'The trick is to mature this pipeline into real product launches by 2005 and that is clearly our first priority.

'We can never exclude anything else, but this is really where the priority is at the moment at GlaxoSmithKline.'